Chapter 2 - Social Security And Workers Comp Flashcards
The cornerstone elements of Social Security became OASDI
Old Age (retirement), Survivors, Disability Insurance.
What is FICA
Federal Insurance Contributions Act: authorizes the payroll taxes levied on employees, employers and self employed. For 2023 its 6.2% for Social Security and 1.45% for Medicare, just a little less that 8% for employee and employer. Self employed pays the full 15%. There is an additional .9% that goes to Medicare for those single making over 200K and joint 250K.
Who is covered by Social Security?
Fully Insured: after working for 10 years (40 quarters). You qualify for all aspects of OASDI. Even if you are also receiving 401K, pension, ect.
Currently Insured: Haven’t worked 10 years, you only get a survivor benefit (very limited).
What is the Primary Insurance Amount (PIA) regarding Social Security?
Using a Average Indexed Monthly Earnings formula to calculate how much money you have paid to FICA. The PIA becomes the basis for calculating all other benefits. As a general guideline, a 65 year old (this age is changing for some workers) who has paid the max to FICA would receive approximately 2,300 a month but it depends on earning history. If you retire early, you get a percentage of the Social Security, if you work longer you can get more.
Google says “The maximum Social Security benefit in 2023 is $3,627 at full retirement age. It’s $4,555 per month if retiring at age 70 and $2,572 if retiring at age 62. A person’s benefit amount depends on earnings, full retirement age and when they take benefits.”
Define Disability regarding Social Security?
The inability to engage in any substantial gainful activity by physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last no less than 12 months. It has an ELIMINATION PERIOD (benefits don’t pay, drain their savings basically) of 5 months meaning that the person must be disabled for 5 months before starting to receive benefits. After receiving disability payments for 2 years (29 months total with the 5 months) Medicare steps in.
The maximum benefit is 100% of PIA.
What are Survivor benefits?
The first survivor benefits is a lump sum payment of $255 to surviving spouse or children to Fully and Currently Insured worker to help cover funeral costs.
The second is a percentage of the PIA. Factors in age and other factors. The spouse doesn’t have to have worked or paid in FICA.
Divorce? If married for 10 years, she would get 50% of PIA at age 62.
Death? spouse would get 100% at 62.
What is Workers Compensation?
Required by state law. Workers comp is the SOLE remedy for an injured worker because the worker gives up the right to sue for receiving these state regulated benefits. The amount is not determined by the policy but by the state legislature.
Injured workers can recover full medical expenses, a portion of lost wages (disability income) and a death benefits (usually a burial benefit).
Employers pay the premium and its determined occupational insurance (on the job). Off the job would be non occupational and paid by their health insurance.
What is the Blackout Period?
A surviving spouse would qualify for survivor benefits if they have children under 16 in the house. When the youngest child reaches 16, the benefits stop or are blackout until age 62. The children get a benefit until they are 18 (19 if they are in college).
